The potential trade barrier comes at a delicate juncture for the Indian textile industry. India is currently the largest supplier of cotton yarn to its eastern neighbour, with Bangladesh serving as the primary destination for Indian exports in this segment. In the previous year, India’s cotton yarn exports were valued at $3.57 billion, with Bangladesh alone accounting for nearly 46% of those shipments.
Industry analysts warn that any such levy would likely trigger a domino effect across India’s agrarian and industrial sectors. A sharp drop in export demand could lead to a glut in the domestic market, depressing prices and impacting the livelihoods of millions of cotton farmers and mill workers. While Bangladesh remains the world's largest importer of raw cotton to feed its massive garment industry, it has traditionally relied on Indian yarn for its cost-effectiveness and logistical proximity.
The timing of this proposal is being viewed through a geopolitical lens, as bilateral relations have remained frigid since the ouster of former Prime Minister Sheikh Hasina in August 2024. The presence of the former leader in India, combined with recent friction over the safety of minorities in Bangladesh, has created a visible chill in diplomatic engagement. Dhaka’s recent pivot towards exploring closer trade ties with other regional players and its increased scrutiny of Indian imports suggest a broader strategic shift under the Yunus-led administration.
Adding to the complexity is a growing internal debate within Bangladesh. While domestic spinning mills have lobbied for protection against what they term "cheap Indian imports," the powerful garment export sector has voiced concerns. Leading apparel manufacturers argue that a 20% tariff would escalate production costs, potentially undermining the global competitiveness of "Made in Bangladesh" clothing at a time when the country is navigating a sensitive economic transition.
As the Bangladesh Trade and Tariff Commission weighs these conflicting interests, the Indian textile sector remains on high alert. For New Delhi, the challenge lies in balancing commercial interests with a complex neighborhood policy, even as one of its most critical trade corridors faces the prospect of a significant protectionist hurdle.
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